FX Breakout Monitor: September 7, 2020

Forex 4 minutes to read

John Hardy

Head of FX Strategy, Saxo Bank Group

Summary:  Even as equity markets gyrate wildly, most major FX pairs remain bottled up in their ranges, although things are stirring around the edges as sterling has weakened suddenly again on taking a hard line on Brexit and the US dollar is pressing hard enough to edge closer to breakout levels in at least two G10 pairings and in USDRUB.


Today’s Potential New Breakout Signals

Today we highlight five potential breakouts in progress that could maintain interest into today’s close of trade. Of these, USDRUB is actively in breakout if it closes at the current level, as is GBPAUD, which has poked to new lows intraday. EURSEK is also close to a breakout level and USDCHF likewise. It is worth noting that US markets are closed today, so volatility may edge lower toward the end of the European session today.

Table: Five potential breakouts today and methods for trading
Note that the stops for the example entry levels are a bit more than 1 ATR from the example entry level (trade size or stop level may need adjusting depending on entry level to reduce risk). These are not trade recommendations, rather examples for how to trade the breakouts. Exit date is simply nine days after trade entry, but 7-9 days is a rule of thumb for holding period and can be shorter still as stops should be partially trailed once a trade moves significantly into profit.

Source: Bloomberg and Saxo Group

Chart highlight: USDRUB
UDSRUB has pulled clear of the range in today’s trade and is at a new high for the local cycle on weakness in oil prices and concerns of sanctions on accusations from Germany surrounding the poisoning of opposition leader Navalny and possibly even on Russian activities in Belarus on the post-election unrest there. The only real resistance area left on the chart is toward the spike highs during the initial Covid-10 panic toward 80.00.

Source: Saxo Group

Chart highlight: GBPAUD
The sterling weakness, in part due to the UK taking a hard line and setting a mid-October deadline for reaching a deal while some legislators are looking to override a portion of the withdrawal agreement linked to the risk of a customs border between Northern Ireland and the Republic of Ireland. GBPUSD has reversed the recent rally badly and EURGBP is zooming back higher, but GBPAUD (and GBPCAD) have been the first pairs to show sterling fully breaking to new local lows beyond the 19-day closing level.

Table: Today’s Breakout Monitor
The breakout monitor below offers an overview of recent daily breakouts (a close above or below the prior 19-day highs or lows and 49-day highs and lows to give an indication of whether it there is also a medium term development). Note the new low close for the cycle on Friday in USDMXN, a USD/EM pair we highlighted on Thursday last week for a potential break – it is trading right on its 200-day moving average and in a very different place from USDRUB (discussed above).

Source: Saxo Group and Bloomberg

Disclaimer

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)
- Full disclaimer (https://www.home.saxo/en-gb/legal/disclaimer/saxo-disclaimer)

Trade Responsibly
All trading carries risk. To help you understand the risks involved we have put together a series of Key Information Documents (KIDs) highlighting the risks and rewards related to each product. Read more
Additional Key Information Documents are available in our trading platform.

Saxo Markets is a registered Trading Name of Saxo Capital Markets Ltd (‘SCML’). SCML is authorised and regulated by the Financial Conduct Authority, Firm Reference Number 551422. Registered address: 26th Floor, 40 Bank Street, Canary Wharf, London E14 5DA. Company number 7413871.

This website, including the information and materials contained in it, are not directed at, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in the United States, Belgium or any other jurisdiction where such distribution, publication, availability or use would be contrary to applicable law or regulation.

It is important that you understand that with investments, your capital is at risk. Past performance is not a guide to future performance. It is your responsibility to ensure that you make an informed decision about whether or not to invest with us. If you are still unsure if investing is right for you, please seek independent advice. Saxo Markets assumes no liability for any loss sustained from trading in accordance with a recommendation.

Apple, iPad and iPhone are trademarks of Apple Inc., registered in the U.S. and other countries. App Store is a service mark of Apple Inc. Android is a trademark of Google Inc.